A few years ago, we saw this peculiar situation play out in the offshore wind sector: Japan tried to hire almost all of its needed talent pool from within its own borders, despite having only a couple of small operational offshore wind farms.
Much of that talent pool came from other renewables (solar primarily), as well as from oil and gas or conventional energy, especially in engineering disciplines. For two reasons, this became a clear handicap for offshore wind.
First, offshore wind is a very complex industry that requires hiring experienced talent. Second, as a nascent market, many players look to hire from the same extremely narrow talent pool. In the end, the math simply did not add up.
Today we face a similar challenge across flexibility markets, power trading, forecasting, and some of the data science and machine learning disciplines. As energy trading volumes increase, new players enter the market, and more flexible assets come online, these skills, which are still rare in Japan, face increasing demand. Japan has some talent in this space, but not enough to cater to the rapidly growing market.
This isn’t a temporary gap. Japan’s energy market liberalization only began in earnest in 2016. The talent pipeline is structurally behind the investment pipeline, and the gap is widening as capital flows in faster than people can be trained.
Functions where this bites hardest now are: power traders with futures and structured product experience; forecasting and analytics specialists; BESS optimization and asset managers.
Demographic reality: Japan is running out of workers
Japan’s population is declining by about one million per year. The working-age population is shrinking faster than the overall population, and the energy sector, competing against tech, finance, automotive and semiconductors, is not at the top of most graduates’ target list.
The energy industry has an additional problem: the generation of engineers who built Japan’s nuclear, thermal and early grid infrastructure is retiring, taking decades of specific knowledge with them. There is no qualified cohort behind them. The TSO talent bleed discussed in recent articles is one symptom of a much larger structural problem.
This is not a problem that training programs alone can solve within the timeframes that Japan’s energy transition requires. Over time, through structured education and re-skilling, Japan will be able to fill some of the needs across its talent landscape; but in many sectors, in the short term at least, Japan will need to rely on imported talent.
Cultural and structural barriers for global talent
Japan’s energy sector has long been insular, dominated by large trading houses and utilities where lifetime employment and Japanese language ability are assumed. For an experienced Australian storage developer or a Danish power trader, the question isn’t just salary and skill fit, it’s whether the environment is one where they can do their job and build a career.
For many roles within the energy sector, even if the hiring companies shift their policies and become open to hiring foreign talent, support with Japanese language training, the fact of the matter is that many roles are difficult for non-Japanese to perform.
Considering that renewables, or any energy projects, are developed in the countryside and rural Japan, people in charge of development, local relationships, and permitting absolutely need to speak Japanese and preferably, actually be Japanese.
Compensation is a genuine barrier. Japan’s base salaries at mid-to-senior levels remain uncompetitive versus equivalent roles in Singapore or Australia, particularly when adjusted for cost of living and the weak yen. Companies serious about global hiring need to benchmark internationally, not domestically.
This is the exact same issue that you find with regional investment funds looking to deploy capital in Japan and other markets. Japan is competing for capital, both monetary and human, not only domestically but against other countries in Asia Pacific, Australia, and beyond.
The companies already getting it right
A small but growing cohort of companies in Japan’s energy sector are attracting and retaining global talent: typically foreign-backed IPPs, specialist advisory firms, and energy tech firms. A key challenge is identifying which roles are best suited to Japanese workers, and which roles face a dearth of talent and whether overseas talent is better suited because of more experience.
A common success formula is to hire global talent into senior leadership roles of a particular function, and then hire bilingual Japanese talent directly underneath them. As that team builds, it can be either bilingual or monolingual Japanese talent. Not everyone needs to speak English.
Over time, this allows for a well-developed, highly skilled native Japanese workforce in a particular function. The space industry has done this well, where you can find multiple high-quality Japanese startups with a well-balanced blend of foreign and Japanese talent.
The mistakes made by companies that have tried and failed are also instructive: hiring global talent into roles that are junior, surrounding them with monolingual teams, and expecting cultural assimilation rather than cultural integration. Global talent hired into these environments typically exits within 18 months.
By all means, Japan can do this on its own – a highly educated nation with excellent engineering, manufacturing, and financial talent. That said, if there are countries active in certain markets for ten years, then that means they have talent with ten years of specific experience.
Japan would be better off learning the lessons that others have learned from practical experience rather than making those same mistakes all over again.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.